April 18, 2005

Fun With Child-Care Markets

Just read an interesting paper (PDF) by Kimberly Morgan, a poli. sci. prof who did a guest stint at Crooked Timber a few weeks back, on the always-fascinating subject of child care. Well, on that and "how labor markets shape social policy, and vice-versa."

A few numbers first. As we know, child care is very, very, very expensive here in America. Non-poor parents pay, on average, 6.6 percent of their income to get someone to look after the kid(s), and families below the poverty line shell out a whopping 28 percent. Tax subsidies for care are piddling and cover, at most, 12 percent of parents with children under the age of 13. Nevertheless, the U.S. child care system is about as cheap as it gets around the world. Its workers make peanuts, turnover is very high, the industry is less than 5 percent unionized, there are few educational requirements, and the rise of family day-care centers (stay-at-home parents running informal centers) has pushed down wages. Most day care resides in the private sector, which does what private sectors are very good at doing: pushes prices down. And since there are few productivity gains to be made in the industry, those low prices must mean low wages. Complain about the cost of a good day-care center if you must, but it's hard to see how prices could possibly drop any further.

So what happens in countries with higher rates of unionization, better wages, more educational requirements, etc.? Well, as you'd expect, there's virtually no private child care market—parents absolutely can't afford the higher prices. So the supply of child care is driven not by market factors, as it is in the U.S., but by largely political decisions. In both France and Sweden, the public child-care sectors are nearly all-encompassing, while countries without public care (Netherlands, Germany), other policies (flexible working hours for women) have become necessary.

Meanwhile, in recent years, the French government has tried to spur the creation of a subsidized private "family care" sector, in order to rein in public spending, but it's had to struggle to do this over the protests of organized labor. Sweden has had less luck on this front, owing to the power of the municipal and teachers unions, Kommunal and Lärarförbundet.

So… it's an interesting way to look at how the structure of labor markets in a given country can affect social policy. The United States, essentially, can get away with refusing to subsidize child care in part because the private market has kept costs so low. Without a vast low-wage workforce available to take care of kids for pennies—and immigration contributes to this state of affairs quite a bit—policymakers would have to make tougher choices about child care. But they don't. Of course, the downside to this is that child-care workers tend to be less-skilled and less-educated than in, say, Sweden. Plus the workers (mostly women) looking over the little tykes earn shit for wages. But hey, at least it's not socialism!